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1.
The
system of accounting where revenues are recorded when they are earned and
expenses are recorded whenthey are incurred is called the cash basis of
accounting.
a.
True
b. False
2. Generally accepted accounting
principles require accrual-basis accounting.
a. True
b. False
3. The revenue recognition concept
states that revenue should be recorded in the same period as the cash is
received.
a. True
b. False
4.
The
matching concept requires expenses be recorded in the same period that the
related revenue is recorded.
a. True
b. False
5. For most large businesses, the
cash basis of accounting will provide accurate financial statements for user
needs.
a. True
b. False
6. An example of deferred revenue
is Unearned Rent.
a. True
b. False
7. Accruals are needed when an
unrecorded expense has been incurred or an unrecorded revenue has been earned.
a. True
b. False
8.
If
the debit portion of an adjusting entry is to an asset account, then the credit
portion must be to a liability account.
a. True
b. False
9. Proper reporting of revenues and
expenses in a period is due to the accounting period concept.
a. True
b. False
10. The revenue recognition concept
requires that the reporting of revenue be included in the period when cash for
theservice is received.
a.
True
b. False
11.
Revenues
and expenses should be recorded in the same period to which they relate.
a. True
b. False
12. The matching concept supports
matching expenses with the related revenues.
a. True
b. False
13. Even though GAAP requires the
accrual basis of accounting, some businesses prefer using the cash basis
ofaccounting.
a.
True
b. False
14.
The
updating of accounts is called the adjusting process.
a. True
b. False
15. Adjusting entries affect balance
sheet accounts at the exclusion of income statement accounts.
a. True
b. False
16. Adjusting entries affect only
expense and asset accounts.
a. True
b. False
17.
An
adjusting entry would adjust revenue so it is reported when earned and not when
cash is received.
a. True
b. False
18. An adjusting entry would adjust
an expense account so the expense is reported when incurred.
a. True
b. False
19. An adjusting entry to accrue an
incurred expense will affect total liabilities.
a. True
b. False
20. The difference between deferred
revenue and accrued revenue is that accrued revenue has been recorded
andneedsadjusting and deferred revenue has never been recorded.
a. True
b. False
21. Deferrals are recorded transactions
that delay the recognition of an expense or revenue.
a. True
b. False
22. Adjustments for accruals are
needed to record a revenue that has been earned or an expense that has
beenincurred but not recorded.
a.
True
b. False
23.
Unearned
revenue is a liability.
a. True
b. False
24. The systematic allocation of
land's cost to expense is called depreciation.
a. True
b. False
25. The difference between the
balance of a fixed asset account and the balance of its related
accumulateddepreciation account is termed the book value of the asset.
a.
True
b. False
26. The balance in the accumulated
depreciation account is the sum of the depreciation expense recorded in
pastperiods.
a.
True
b. False
27. Accumulated depreciation
accounts are liability accounts.
a. True
b. False
28. Accumulated depreciation is
reported on the income statement.
a. True
b. False
29.
A
contra asset account for Land will normally appear on the balance sheet.
a. True
b. False
30.
Depreciation
Expense is reported on the balance sheet as an addition to the related asset.
a. True
b. False
31.
A
company pays $36,000 for twelve month's rent on October 1, recording the
prepayment as an asset. Theadjusting
entry on December 31 is a debit to Rent Expense, $9,000, and a credit to Prepaid
Rent, $9,000.
a. True
b. False
32. A company receives $360 for a
12-month trade magazine subscription on August 1. The adjusting entry onDecember 31 is a debit
to Unearned Subscription Revenue, $150, and credit to Subscription Revenue,
$150.
a.
True
b. False
33. A company depreciates its
equipment $500 a year. The adjusting
entry on December 31 is a debit to DepreciationExpense, $500, and a credit to
Equipment, $500.
a.
True
b. False
34. A company pays an employee
$3,000 for a fiveday work week, Monday–Friday.
The adjusting entry onDecember 31, which is a Wednesday, is a debit to
Wages Expense, $1,800, and a credit to Wages Payable, $1,800.
a. True
b. False
35. A company receives $6,500 for
two season tickets sold on September 1.
If $2,500 is earned by December 31, theadjusting entry made at that time
is a debit to Cash, $2,500, and a credit to Ticket Revenue, $2,500.
a.
True
b. False
36. A company realizes that the last
two day's revenue for the month was billed but not recorded. The adjusting entryon December 31 is a debit
to Accounts Receivable and a credit to Fees Earned.
a.
True
b. False
37. At year-end, the balance in the
prepaid insurance account, prior to any adjustments, is $6,000. The amount of thejournal entry required to
record insurance expense will be $4,000 if the amount of unexpired insurance
applicable tofuture periods is $2,000.
a.
True
b. False
38.
A
fixed asset’s market value is reflected on the balance sheet.
a. True
b. False
39. If the adjustment for accrued
salaries at the end of the period is inadvertently omitted, both liabilities
and owner'sequity will be understated for the period.
a.
True
b. False
40. If the adjustment to recognize
expired insurance at the end of the period is inadvertently omitted, the assets
at theend of the period will be understated.
a.
True
b. False
41. If the adjustment of the
unearned rent account at the end of the period to recognize the amount of rent
earned isinadvertently omitted, the net income for the period will be
understated.
a.
True
b. False
42. If the adjustment for
depreciation for the year is inadvertently omitted, the assets on the balance
sheet at the end ofthe period will be understated.
a.
True
b. False
43. Adjusting journal entries are
dated on the last day of the period.
a. True
b. False
44. By ignoring and not posting the
adjusting journal entries to the appropriate accounts, net income will always
beoverstated.
a.
True
b. False
45. The financial statements are
prepared from the unadjusted trial balance.
a. True
b. False
46. The adjustment for accrued fees
was debited to Accounts Payable instead of Accounts Receivable. This error willbe detected when the adjusted
trial balance is prepared.
a.
True
b. False
47.
The
adjusted trial balance verifies that total debits equals total credits before
the adjusting entries are prepared.
a. True
b. False
48. Vertical analysis compares each
item in a financial statement with a total amount from the same statement.
a. True
b. False
49. When preparing an income
statement vertical analysis, each revenue and expense is expressed as a percent
of netincome.
a.
True
b. False
50.
Vertical
analysis is useful for analyzing financial statement changes over time.
a. True
b. False
51.
The
revenue recognition concept
a. is not in conflict with the cash
method of accounting.
b. determines when revenue is
credited to a revenue account.
c. states that revenue is not
recorded until the cash is received.
d. controls all revenue reporting
for the cash basis of accounting.
52. The matching concept
a. addresses the relationship
between the journal and the balance sheet.
b. determines whether the normal
balance of an account is a debit or credit.
c. requires that the dollar amount
of debits equal the dollar amount of credits on a trial balance.
d. states that the revenues and
related expenses should be reported in the same period.
53.
Using
accrual accounting, revenue is recorded and reported only
a. when cash is received without
regard to when the services are rendered.
b. when the services are rendered
without regard to when cash is received.
c. when cash is received at the
time services are rendered.
d. if cash is received after the
services are rendered.
54. Using accrual accounting,
expenses are recorded and reported only
a. when they are incurred, whether
or not cash is paid
b. when they are incurred and paid
at the same time
c. if they are paid before they are
incurred
d. if they are paid after they are
incurred
55. The accounting concepts upon
which deferrals and accruals are based is
a. matching
b. cost
c. price-level adjustment
d. conservatism
56. If the effect of the debit
portion of an adjusting entry is to increase the balance of an expense account,
which of thefollowing describes the effect of the credit portion of the entry?
a. decreases the balance of an
owner's equity account
b. increases the balance of a
liability account
c. increases the balance of an
asset account
d. decreases the balance of an
expense account
57. If the effect of the credit
portion of an adjusting entry is to increase the balance of a liability
account, which of thefollowing describes the effect of the debit portion of the
entry?
a. increases the balance of a
contra asset account
b. increases the balance of an
asset account
c. decreases the balance of an
owner's equity account
d. increases the balance of an
expense account
58. Prior to the adjusting process,
accrued expenses have
a. not yet been incurred, paid, or
recorded
b. been incurred, not paid, but
have been recorded
c. been incurred, not paid, and not
recorded
d. been paid but have not yet been
incurred
59.
Prior
to the adjusting process, accrued revenue has
a. been earned and cash received
b. been earned and not recorded as
revenue
c. not been earned but recorded as
revenue
d. not been recorded as revenue but
cash has been received
60. Deferred expenses have
a. not yet been recorded as
expenses but have been paid
b. been recorded as expenses and
paid
c. been incurred and paid
d. not yet been recorded as
expenses
61.
Deferred
revenue is revenue that is
a. earned and the cash has been
received
b. earned but the cash has not been
received
c. not earned and the cash has not
been received
d. not earned but the cash has been
received
62.
Adjusting
entries are
a. the same as correcting entries
b. needed to bring accounts up to
date and match revenue and expense
c. optional under generally
accepted accounting principles
d. rarely needed in large companies
63. Adjusting entries affect at
least one
a. income statement account and one
balance sheet account
b. revenue and the drawing account
c. asset and one owner's equity
account
d. revenue and one capital account
64. The term used to describe an
expense that has not been paid and has not yet been recognized in the accounts
by aroutine entry is
a. prepaid
b. deferred
c. accrued
d. matched
65.
Which
of the following is not a characteristic of accrual basis of accounting?
a. Revenues and expenses are
reported in the period in which cash is received or paid.
b. Revenues are reported on the
income statement in the period in which they are earned.
c. Accrual basis of accounting
supports the matching concept.
d. Expenses are reported in the
same period as the revenues to which they relate.
66. Generally accepted accounting
principles require that companies use the of accounting.
a. cash basis
b. deferral basis
c. accrual basis
d. account basis
67. The cash basis of accounting
records revenues and expenses when the cash is exchanged while the accrual
basisof accounting
a. records revenues when they are
earned and expenses when they are paid
b. records revenues and expenses
when they are incurred
c. records revenues when cash is
received and expenses when they are incurred
d. records revenues and expenses
when the company needs to apply for a loan
68.
By
matching revenues and expenses in the same period in which they incur
a. net income or loss will always
be underestimated
b. net income or loss will always
be overestimated
c. net income or loss will be
properly reported on the income statement
d. net income or loss will not be
determined
69. Adjusting entries always include
a. only income statement accounts
b. only balance sheet accounts
c. the cash account
d. at least one income statement
account and one balance sheet account
70. Prepaid expenses are eventually expected
to
a. become expenses when their
future economic value expires
b. become revenues when services
are performed
c. become expenses in the period
when they are paid
d. become revenues when the
liability is no longer owed
71.
Which
of the following is considered to be unearned revenue?
a. theater tickets sold last month
for yesterday’s performance
b. theater tickets sold yesterday
on credit for yesterday’s performance
c. theater tickets that were not
sold for the current performance
d. theater tickets sold for next
month’s performance
72.
Which
of the following is an example of accrued revenue?
a. snow removal services that have
been paid for three months in advance
b. snow removal services that have
been provided but have not been billed or paid
c. an agreement that has been
signed for snow removal services for the next three months
d. snow removal services that has
been provided and paid on the same day
73.
Which
of the following is considered to be an accrued expense?
a. A computer technician has
installed the latest software updates and was paid on the same day.
b. A computer technician has been
paid in advance to install software updates as they become available.
c. A computer technician has just
signed an agreement with you regarding pricing for future work.
d. A computer technician has
installed the latest software updates, but you have not received an invoice
ormade payment.
74.
Which
account would normally not require an adjusting entry?
a. Wages Expense
b. Accounts Receivable
c. Accumulated Depreciation
d. Cash
75. Which one of the accounts below
would likely be included in an accrual adjusting entry?
a. Insurance Expense
b. Prepaid Rent
c. Interest Expense
d. Unearned Rent
76. Which of the following accounts
would likely be included in a deferral adjusting entry?
a. Interest Revenue
b. Unearned Revenue
c.
Salaries
Payable
d.
Accounts
Receivable
77. The balance in the prepaid rent
account before adjustment at the end of the year is $32,000, which represents
fourmonths' rent paid on December 1. The
adjusting entry required on December 31 is
a. debit Rent Expense, $8,000;
credit Prepaid Rent, $8,000
b. debit Prepaid Rent, $24,000;
credit Rent Expense, $8,000
c. debit Rent Expense, $24,000;
credit Prepaid Rent, $8,000
d. debit Prepaid Rent, $8,000;
credit Rent Expense, $8,000
78. The balance in the office
supplies account on January 1 was $7,000, supplies purchased during January
were$3,000, and the supplies on hand at January 30 were $2,000. The amount to be used for the appropriate
adjustingentry is
a. $4,300
b. $12,000
c. $5,000
d. $8,000
79. Which of the following is the
proper adjusting entry, based on a prepaid insurance account balance
beforeadjustment of $14,000 and unexpired insurance of $3,000, for the fiscal
year ending on April 30?
a. debit Insurance Expense, $3,000;
credit Prepaid Insurance, $3,000
b. debit Insurance Expense,
$14,000; credit Prepaid Insurance, $14,000
c. debit Prepaid Insurance,
$11,000; credit Insurance Expense, $11,000
d. debit Insurance Expense,
$11,000; credit Prepaid Insurance, $11,000
80.
The
entry to adjust for the cost of supplies used during the accounting period is
a. debit Supplies Expense; credit
Supplies
b. debit Owner Capital; credit
Supplies
c. debit Accounts Payable; credit
Supplies
d. debit Supplies; credit Owner
Capital
81. Buster Industries pays weekly
salaries of $30,000 on Friday for a five-day week ending on that day. The adjustingentry necessary at the end of
the fiscal period ending on Tuesday is
a. debit Salaries Payable, $12,000;
credit Cash, $12,000
b. debit Salary Expense, $12,000;
credit Drawing, $12,000
c. debit Salary Expense, $12,000;
credit Salaries Payable, $12,000
d. debit Drawing, $12,000; credit
Cash, $12,000
82. The difference between the
balance of a fixed asset account and the related accumulated depreciation
account istermed
a. historical cost
b. contra asset
c. book value
d. market value
83.
The
adjusting entry to record the depreciation of a building for the fiscal period
is
a. debit Depreciation Expense;
credit Building.
b. debit Depreciation Expense;
credit Accumulated Depreciation.
c. debit Accumulated Depreciation;
credit Depreciation Expense.
d. debit Building; credit
Depreciation Expense.
84. As time passes, fixed assets
other than land lose their capacity to provide useful services. To account for thisdecrease in usefulness,
the cost of fixed assets is systematically allocated to expense through a process
called
a. equipment allocation
b. depreciation
c. accumulation
d. matching
85.
The
entry to adjust the accounts for salaries accrued at the end of the accounting
period is
a. debit Salaries Payable; credit
Salaries Income
b. debit Salaries Income; credit
Salaries Payable
c. debit Salaries Payable; credit Salaries
Expense
d. debit Salaries Expense; credit
Salaries Payable
86. The supplies account has a
balance of $4,400 at the beginning of the year and was debited during the year
for$2,400, representing the total of supplies purchased during the year. If $400 of supplies are on hand at the end
ofthe year, the supplies expense to be reported on the income statement for the
year is
a. $400
b. $2,000
c. $6,800
d. $6,400
87. Smokey Company purchases a
one-year insurance policy on July 1 for $3,600.
The adjusting entry on December31 is
a. debit Insurance Expense, $1,800;
credit Prepaid Insurance, $1,800
b. debit Insurance Expense, $1,500;
credit Prepaid Insurance, $1,500
c. debit Insurance Expense, $2,100;
credit Prepaid Insurance, $2,100
d. debit Prepaid Insurance, $1,800;
credit Cash, $1,800
88. Gracie, Inc. made a prepaid rent
payment of $2,800 on January 1. The
company’s monthly rent is $700.
Theamount of prepaid rent that would appear on the January 31 balance
sheet after adjustment is
a. $2,100
b. $700
c. $2,800
d. $1,400
89.
Accumulated
Depreciation and Depreciation Expense are classified, respectively, as
a. expense, contra asset
b. asset, contra liability
c. revenue, asset
d. contra asset, expense
90. The type of account and normal
balance of Prepaid Insurance is
a. asset, credit
b. asset, debit
c. contra asset, credit
d. contra asset, debit
91.
The
type of account and normal balance of Unearned Consulting Fees is
a. revenue, credit
b. expense, debit
c. liability, credit
d. liability, debit
92. Data for an adjusting entry
described as "accrued wages, $2,020" requires a
a. debit to Wages Expense and a
credit to Wages Payable
b. debit to Wages Payable and a
credit to Wages Expense
c. debit to Accounts Receivable and
a credit to Wages Expense
d. debit to Drawing and a credit to
Wages Payable
93. Supplies are recorded as assets
when purchased. Therefore, the credit to Supplies in the adjusting entry is for
theamount of supplies
a. still on hand
b. purchased
c. used
d. required for the next accounting
period
94.
If
there is a balance in the prepaid rent account after adjusting entries are
made, it represents a(n)
a. deferral
b. accrual
c. revenue
d. liability
95. If there is a balance in the
unearned subscriptions account after adjusting entries are made, it represents
a(n)
a. deferral
b. accrual
c. drawing
d. revenue
96. The cost of office supplies to
be used in future periods is ordinarily shown on the balance sheet as a(n)
a. capital
b. asset
c. contra asset
d. liability
97.
Which
of the following is an example of a prepaid expense?
a. Supplies
b. Accounts Receivable
c. Unearned Subscriptions
d. Unearned Fees
98.
The
unexpired insurance at the end of the fiscal period represents
a. an accrued asset
b. an accrued liability
c. an accrued expense
d. a deferred expense
99. Accrued revenues would appear on
the balance sheet as
a. assets
b. liabilities
c. capital
d. prepaid expenses
100.
Prepaid
advertising, representing payment for the next quarter, would be reported on
the balance sheet as a(n)
a. asset
b. liability
c. contra asset
d. capital
101. Prepaid rent, representing rent
for the next six months' occupancy, would be reported on the tenant's balance
sheetas a(n)
a. asset
b. liability
c. capital account
d. contra liability
102.
Accrued
expenses are ordinarily reported on the balance sheet as
a. assets
b. liabilities
c. fixed assets
d. prepaid expenses
103.
Fees
payable would appear on the balance sheet as a(n)
a. asset
b. liability
c. fixed asset
d. unearned revenue
104. The general term used to
indicate delaying the recognition of an expense already paid or of a revenue
alreadyreceived is
a. depreciation
b. deferral
c. accrual
d. inventory
105. The adjusting entry for gym
memberships earned that was previously recorded in the unearned gym
membershipsaccount is
a. debit Unearned Gym Memberships;
credit Gym Memberships Revenue
b. debit Gym Memberships Revenue;
credit Unearned Gym Memberships
c. debit Unearned Gym Memberships;
credit Prepaid Gym Memberships
d. debit Gym Memberships Expense;
credit Unearned Gym Memberships
106.
Which
of the following pairs of accounts could not appear in the same adjusting entry?
a.
Service
Revenue and Unearned Revenue
b.
Interest
Income and Interest Expense
c.
Rent
Expense and Prepaid Rent
d.
Salaries
Payable and Salaries Expense
107. The unearned rent account has a
balance of $72,000. If $18,000 of the
$72,000 is unearned at the end of theaccounting period, the amount of the
adjusting entry is
a. $18,000
b. $90,000
c. $54,000
d. $36,000
108.
The
following adjusting journal entry does not include an explanation. Select the best explanation for the entry.
|
Unearned
Revenue
|
7,500
|
|
|
Fees
Earned
|
|
7,500
|
|
????????????????
|
|
|
a. Record payment of fees earned.
b. Record fees earned at the end of
the month.
c. Record fees that have not been
earned at the end of the month.
d. Record payment of fees to be
earned.
109.
The
following adjusting journal entry does not include an explanation. Select the best explanation for the entry.
|
Supplies
Expense
|
730
|
|
|
Supplies
|
|
730
|
|
????????????????
|
|
|
a. Adjust supplies inventory to
actual.
b. Record purchase of supplies.
c. Reduce supplies expense.
d. Record sale of supplies.
110. The following adjusting journal
entry found in the journal is missing an explanation. Select the best explanation forthe entry.
|
Wages
Expense
|
4,500
|
|
|
Wages
Payable
|
|
4,500
|
|
????????????????
|
|
|
a. Record payment of wages.
b. Record wages paid last month.
c. Record wages paid in advance.
d. Record wages expense incurred
and to be paid next month.
111.
What
effect will this adjustment have on the accounting records?
|
Unearned
Revenue
|
6,375
|
|
|
Fees
Earned
|
|
6,375
|
a. Increase net income
b. Increase revenues reported for
the period
c. Decrease liabilities
d. All of these are true.
112. What effect will this adjusting
journal entry have on the accounting records?
|
Supplies
Expense
|
760
|
|
|
Supplies
|
|
760
|
a. Increase income
b. Decrease net income
c. Decrease expenses
d. Increase assets
113.What effect will the following
adjusting journal entry have on the accounting records?
|
Depreciation
Expense
|
2,150
|
|
|
Accumulated Depreciation
|
|
2,150
|
a. Increase net income
b. Increase revenues
c. Decrease expenses
d. Decrease net book value
114. How will the following adjusting
journal entry affect the accounting equation?
|
Unearned
Subscriptions
|
11,500
|
|
|
Subscriptions
Earned
|
|
11,500
|
a. Increase assets, increase
revenues
b. Increase liabilities, increase
revenues
c. Decrease liabilities, increase
revenues
d. Decrease liabilities, decrease
revenues
115.
Which
of the following is not true regarding depreciation?
a. Depreciation allocates the cost
of a fixed asset over its estimated life.
b. Depreciation expense reflects
the decrease in market value each year.
c. Depreciation is an allocation
not a valuation method.
d. Depreciation expense does not
measure changes in market value.
116. The account type and normal
balance of Prepaid Expense is
a. revenue, credit
b. expense, debit
c. liability, credit
d. asset, debit
117. The account type and normal
balance of Unearned Revenue is
a. revenue, credit
b. expense, debit
c. liability, credit
d. asset, debit
118.
Which
of the following is an example of an accrued expense?
a. Salary owed but not yet paid
b. Fees received but not yet earned
c. Supplies on hand
d. A two-year premium paid on a
fire insurance policy
119.
The
net book value of a fixed asset is determined by the original cost
a. less accumulated depreciation
b. less depreciation expense
c. less accumulated depreciation
plus depreciation expense
d. plus accumulated depreciation
120. The balance in the supplies
account before adjustment at the end of the year is $6,250. The proper adjusting entryif the amount of
supplies on hand at the end of the year is $1,500 would be
a. debit Supplies, $1,500; credit
Supplies Expense, $1,500
b. debit Supplies Expense, $4,750;
credit Supplies, $4,750
c. debit Supplies Expense, $1,500;
credit Supplies, $1,500
d. debit Supplies, $4,750; credit
Supplies Expense, $4,750
121. The net income reported on the
income statement is $58,000. However, adjusting entries have not been made
atthe end of the period for supplies expense of $2,200 and accrued salaries of
$1,300. Net income, as corrected, is
a. $56,700
b. $58,000
c. $55,800
d. $54,500
122. At the end of the fiscal year,
the usual adjusting entry to Prepaid Insurance to record expired insurance
wasomitted. Which of the following
statements is true?
a. Total assets at the end of the
year will be understated.
b. Owner's equity at the end of the
year will be understated.
c. Net income for the year will be
overstated.
d. Insurance Expense will be
overstated.
123. At the end of the fiscal year,
the usual adjusting entry for depreciation on equipment was omitted. Which of
thefollowing statements is true?
a. Total assets will be understated
at the end of the current year.
b. The balance sheet and income
statement will be misstated but the statement of owner's equity will be
correctfor the current year.
c. Net income will be overstated
for the current year.
d. Total liabilities and total
assets will be understated.
124. At the end of the fiscal year,
the usual adjusting entry for accrued salaries owed to employees was
omitted. Whichof the following
statements is true?
a. Salary Expense for the year was
understated.
b. The total of the liabilities at
the end of the year was overstated.
c. Net income for the year was
understated.
d. Owner's equity at the end of the
year was understated.
125. The adjusting entry to adjust
supplies was omitted at the end of the year.
This would affect the income statementby having
a. expenses understated and
therefore net income overstated
b. revenues understated and
therefore net income understated
c. expenses understated and
therefore net income understated
d. expenses overstated and
therefore net income understated
126. Which of the accounts below
would most likely appear on an adjusted trial balance but probably would not appearon
the trial balance?
a. Fees Earned
b. Accounts Receivable
c. Unearned Fees
d. Depreciation Expense
127.
Which
of the accounting steps in the accounting process below would be completed
last?
a. preparing the adjusted trial
balance
b. posting
c. preparing the financial
statements
d. journalizing
128. When is the adjusted trial
balance prepared?
a. Before adjusting journal entries
are posted
b. After adjusting journal entries
are posted.
c. After the adjusting journal
entries are journalized
d. Before the adjusting journal
entries are journalized.
129. What is the purpose of the
adjusted trial balance?
a. to verify that all of the
adjusting entries have been posted
b. to verify that the net income (loss)
is correctly reported
c. to verify that no adjusting
journal entry has been omitted.
d. to verify that the debits and
credits balance
130.
All
of the following statements regarding vertical analysis are true except:
a. Vertical analysis may be
prepared for several periods to analyze changes in relationships over time.
b. In a vertical analysis of a
balance sheet, each asset item is stated as a percent of total assets.
c. In a vertical analysis of an
income statement, each item is stated as a percent of total expenses.
d. Major differences between a
company’s vertical analysis and industry averages should be investigated.
131.
Two
income statements for Toby Sam Enterprises are shown below:
Toby Sam Enterprises
Income Statement
For
the Years 2 and 1 Ending December 31
|
|
Year 2
|
Year 1
|
|
Fees earned
|
$674,350
|
$520,600
|
|
Operating expenses
|
472,045
|
338,390
|
|
Operating income
|
$202,305
|
$182,210
|
Prepare a vertical analysis of Toby Sam Enterprises income
statements. Has operating income
increased ordecreased as a percentage of revenue?
a.
Yes,
increased by 5%. b. Yes, increased by
111%.
c. No, decreased by 5%. d. No, decreased by 111%
132. For the year ending December 31,
Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that
wereused, (2) unearned revenue of $4,200 that was earned, and (3) insurance of
$5,000 that expired. For the yearending
December 31, what is the effect of these errors on revenues, expenses, and net
income?
a.
Revenues
are overstated by $4,200. b. Net income
is overstated by $2,300.
c. Expenses are overstated by
$6,500. d. Expenses are understated by
$3,500.
133. A business pays bi-weekly
salaries of $20,000 every other Friday for a ten-day period ending on that
day. Theadjusting entry necessary at the
end of the fiscal period ending on the second Wednesday of the pay period
includesa
a.
debit
to Salary Expense of $8,000. b. debit
to Salaries Payable of $8,000
c. credit to Salary Expense of
$16,000 d. credit to Salaries Payable of
$16,000
134. A business pays bi-weekly
salaries of $20,000 every other Friday for a ten-day period ending on that
day. The lastpayday of December is
Friday, December 27. Assuming the next
pay period begins on Monday, December 30 andthe proper adjusting entry is
journalized at the end of the fiscal period (December 31). The entry for the paymentof the payroll on
Friday, January 10 includes a
a. debit to Salary Expense of
$16,000 b. debit to Salary Expense of
$4,000
c. credit to Salary Payable of
$16,000 d. credit to Salary Payable of
$4,000
135.
Explain
the difference between accrual basis accounting and cash basis accounting.
136. Indicate with a Yes or No
whether or not each of the following accounts would, under normal
circumstances,require an adjusting entry.
1.
Cash
2. Prepaid Expenses
3.
Depreciation
Expense
4.
Accounts
Payable
5. Accumulated Depreciation
6.
Equipment
137. Classify the following items as:
(1) prepaid expense, (2) unearned revenue, (3) accrued expense, or (4)
accruedrevenue.
a) Fees received but not yet earned
b)
Fees
earned but not yet received
c)
Paid
premium on a one-year insurance policy
d)
Property
tax owed to be paid beginning of next year
138. Zoey Bella Corp. has a payroll
of $10,000 for a five-day workweek. Its
employees are paid each Friday for thefive-day workweek. The adjusting entry on December 31 assuming
the year ends on Thursday would be:
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Date
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Description
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Post Ref
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Debit
|
Credit
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139.
A
one-year insurance policy was purchased on June 1 for $2,400. The adjusting entry on December 31 would be:
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Date
|
Description
|
Post Ref
|
Debit
|
Credit
|
|
|
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140. Depreciation on an office
building is $2,800. The adjusting entry
on December 31 would be:
|
Date
|
Description
|
Post Ref
|
Debit
|
Credit
|
|
|
|
|
|
|
|
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141. Gizmo Inc. purchased a one-year
insurance policy on October 1 for $1,800.
The adjusting entry on December 31would be:
|
Date
|
Description
|
Post Ref
|
Debit
|
Credit
|
|
|
|
|
|
|
|
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|
|
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142. The supplies account had a
beginning balance of $1,750. Supplies
purchased during the period totaled $3,500.
Atthe end of the period before adjustment, $350 of supplies were on
hand. Prepare the adjusting entry for
supplies.
143. On January 1, DogMart Company
purchased a two-year liability insurance policy for $22,800 cash. The
purchasewas recorded to Prepaid Insurance. Prepare the January 31 adjusting
entry.
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144. DogMart Company records
depreciation for equipment. Depreciation for the period ending December 31 is
$1,400for office equipment and $2,650 for production equipment. Prepare two
entries to record the depreciation.
145. On March 1, a business paid
$3,600 for a twelve-month liability insurance policy. On April 1, the same businessentered into a
two-year rental contract for equipment at a total cost of $18,000. Determine
the following amounts:
(a) insurance expense for the month
of March
(b)
prepaid
insurance as of March 31
(c)
equipment
rent expense for the month of April
(d)
prepaid
equipment rental as of April 30
146. On January 1, the Newman Company
estimated its property tax to be $5,100 for the year.
(a)
How
much should the company accrue each month for property taxes?
(b)
Calculate
the balance in Property Tax Payable as of August 31.
(c)
Prepare
the adjusting journal entry for the month of September.
147.
On
January 1, Power House Co. prepays the year’s rent, $10,140. Prepare the
journal entry by recording theprepayment to an asset account.
148.
Record
journal entries for the following:
(a) On December 1, $18,000 was
received for a service contract to be performed from December 1 through
April30.
(b)If the service work for this
contract is performed evenly and on a regular basis throughout this period,
preparethe adjusting journal entry on December 31.
149. On December 31, the balance in
the office supplies account is $1,385. A count shows $435 worth of supplies
onhand. Prepare the adjusting entry for supplies.
150.
Depreciation
on equipment for the year is $6,300.
(a)
Record
the journal entry if the company adjusts its account once a year.
(b) Record the journal entry if the
company adjusts its account on a monthly basis.
151. The company determines that the
interest expense on a note payable for period ending December 31 is $775.
Thisamount is payable on January 1. Prepare the journal entries required on
December 31 and January 1.
152. On January 2, Dog Mart prepaid
$30,000 rent for the year and recorded the prepayment in an asset
account.Prepare the January 31 adjusting entry for rent expense.
153. The prepaid insurance account
had a beginning balance of $6,600 and was debited for $2,300 of premiums
paidduring the year. Journalize the
adjusting entry required at the end of the year assuming the amount of unexpiredinsurance
related to future periods is $4,100.
154. The balance in the unearned fees
account, before adjustment at the end of the year, is $10,250. Journalize theadjusting entry required if the
amount of unearned fees at the end of the year is $3,125.
155. At the end of the current year,
$3,700 fees have been earned but have not been billed to clients. Journalize theadjusting entry to record the
accrued fees.
156. Ski Master Company pays weekly
salaries of $18,000 on Friday for a five-day week ending on that day. Journalizethe necessary adjusting entry at
the end of the accounting period, assuming that the period ends on Wednesday.
157. The estimated amount of
depreciation on equipment for the current year is $5,300. Journalize the adjusting entry torecord the
depreciation.
158. At January 31, the end of the
first month of the year, the usual
adjusting entry transferring expired insurance to anexpense account is
omitted. Which items will be incorrectly
stated, because of the error, on (a) the incomestatement for January and (b)
the balance sheet as of January 31? Also
indicate whether the items in error will beoverstated or understated.
At
the end of April, the first month of the year, the usual adjusting entry
transferring rent earned to a revenueaccount from the unearned rent account was
omitted. Indicate which items will be
incorrectly stated, because ofthe error, on (a) the income statement for April
and (b) the balance sheet as of April 30.
Also indicate whether theitems in error will be overstated or understated.
159. Salaries of $6,400 are paid for
a five-day week on Friday. Prepare the
adjusting journal entry that is required if themonth ends on Thursday.
160. Accrued salaries of $600 owed to
employees for December 29, 30, and 31 are not taken into consideration inpreparing
the financial statements for the year ended December 31. Indicate which items
will be erroneouslystated, because of the error, on (a) the income statement
for the year and (b) the balance sheet as of December
31. Also indicate whether the items
in error will be overstated or understated.
161. For the year ending December 31,
Beard Clinical Supplies Co. mistakenly omitted adjusting entries for (1) $9,800
ofunearned revenue that was earned, (2) earned revenue that was not billed of
$10,200, and (3) accrued wages of$7,000.
Indicate the combined effect of the errors on (a) revenues, (b)
expenses, and (c) net income.
162. For each of the following
errors, considered individually, indicate whether the error would cause the
adjusted trialbalance totals to be unequal. If the error would cause the
adjusted trial balance total to be unequal, indicate whetherthe debit or credit
total is higher and by how much.
a)
The
adjustment for unearned fees of $3,260 was journalized as a debit to
AccountsPayable for $3,260 and a credit to Fees Earned of $3,260.
b)
The
adjustment for supplies expense of $425 was journalized as a debit to
SuppliesExpense for $542 and a credit to Supplies for $425.
163. On January 1, Great Designs
Company had a debit balance of $1,450 in the office supplies account. During
themonth, Great Designs purchased $115 and $160 of office supplies and
journalized them to the asset account uponpurchasing. On January 31, an
inspection of the office supplies cabinet shows that only $350 of office
suppliesremains. Prepare the January 31 adjusting entry for office supplies.
164. Listed below are accounts to use
for transactions (a) through (j), each identified by a number. Following this listare the transactions. You are to indicate for each transaction the
accounts that should be debited and credited byplacing the account number(s) in
the appropriate box.
1.
Accounts
Payable
2.
Accounts
Receivable
3.
Accumulated
Depreciation - Office Equipment
4.
Building
5.
Capital
Stock
6.
Cash
7.
Depreciation
Expense - Office Equipment
8.
Dividends
9.
Insurance
Expense
10.
Insurance
Payable
11.
Interest
Expense
12.
Interest
Payable
13.
Interest
Receivable
14.
Land
15.
Notes
Payable
16.
Office
Supplies
17.
Office
Supplies Expense
18.
Owner
Capital
19.
Prepaid
Insurance
20.
Service
Revenue
21.
Unearned
Service Revenue
22.
Utilities
Expense
23.
Utilities
Payable
|
Transactions
|
Account(s)
Debited
|
Account(s)
Credited
|
|
a. Utility bill is received;
payment will bemade in 10 days.
|
|
|
|
b. Paid the utility bill
previously recorded intransaction (a).
|
|
|
|
c. Bought a three-year
insurance policy andpaid in full.
|
|
|
|
d. Made an entry to adjust for
the expiredportion of the insurance premium.
|
|
|
|
e. Received $7,000 from a
contract toperform accounting services over thenext two years.
|
|
|
|
f. Made an entry to adjust for
half of theservices performed in (e).
|
|
|
|
g. Purchased office supplies,
paying partcash and charging the balance onaccount.
|
|
|
|
h. Borrowed money from a bank
andsigned a note payable due in six months.
|
|
|
|
i.
Recorded onemonth’s accrued interest
on
the note payable.
|
|
|
|
j. Depreciation is recorded on
officeequipment.
|
|
|
|
165. REM Consulting is completing the
accounting information processing at the end of the fiscal year, December
31. The following
trial balances are available.
|
Accounts
|
Unadjusted
TrialBalance |
Adjusted
TrialBalance |
||
|
|
Debits
|
Credits
|
Debits
|
Credits
|
|
Cash
|
13,000
|
|
13,000
|
|
|
Accounts
Receivable
|
1,500
|
|
1,800
|
|
|
Prepaid
Insurance
|
600
|
|
200
|
|
|
Supplies
|
3,800
|
|
3,000
|
|
|
Machines
|
30,000
|
|
30,000
|
|
|
Accumulated
Depreciation - Machines
|
|
12,000
|
|
17,500
|
|
Wages
Payable
|
|
|
|
900
|
|
Unearned
Revenue
|
|
6,700
|
|
6,500
|
|
R
Miller, Capital
|
|
24,000
|
|
24,000
|
|
R
Miller, Drawing
|
4,800
|
|
4,800
|
|
|
Service
Revenue
|
|
25,000
|
|
25,500
|
|
Wages
Expense
|
14,000
|
|
14,900
|
|
|
Insurance
Expense
|
|
|
400
|
|
|
Supplies
Expense
|
|
|
800
|
|
|
Depreciation
Expense
|
|
|
5,500
|
|
|
|
67,700
|
67,700
|
74,400
|
74,400
|
a.
Reconstruct
the adjusting entries and give a brief explanation of each.
b.
What
is the amount of net income?
166.
Given
the following account balances for Garry’s Tree Service, prepare a trial
balance.
|
Cash
|
$25,000
|
|
Supplies
|
1,000
|
|
Accounts
Payable
|
7,000
|
|
Garry
Ryan, Capital
|
32,910
|
|
Wage
Expense
|
2,000
|
|
Machinery
|
18,350
|
|
Wages
Payable
|
3,600
|
|
Service
Revenue
|
21,000
|
|
Rent
Expense
|
11,500
|
|
Unearned
Revenue
|
1,500
|
|
Accumulated
Depreciation - Machinery
|
7,340
|
|
Prepaid
Rent
|
12,200
|
|
Garry
Ryan, Drawing
|
3,300
|
167.
List
the four basic types of accounts that require adjusting entries and give an
example of each.
168. For the year ending June 30,
Island Clinical Services mistakenly omitted adjusting entries for (1) $1,500 of
suppliesthat were used, (2) unearned revenue of $4,200 that was earned, and (3)
insurance of $5,000 that expired. What
isthe combined effect of these errors on (a) revenues, (b) expenses, and (c)
net income for the year ending June 30?
169. Indicate whether the following
error would cause the adjusted trial balance totals to be unequal. If the error wouldcause the adjusted trial
balance totals to be unequal, indicate whether the debit or credit total is
higher and by howmuch.
The entry for $975 of supplies used during the period was
journalized as a debit to Supplies Expense of $795 andcredit to Supplies of
$975.
170. Indicate whether the following
error would cause the adjusted trial balance totals to be unequal. If the error wouldcause the adjusted trial
balance totals to be unequal, indicate whether the debit or credit total is
higher and by howmuch.
The adjustment for accrued fees of $1,170 was journalized as
a debit to Accounts Receivable for $1,170 and acredit to Fees Earned for
$1,107.
171. Under the accrual basis, some
accounts in the ledger require updating at the end of the period. Discuss the
threemain reasons for this updating and give an example of each.
172. What is the purpose of an
adjusted trial balance? What type(s) of
error does it detect? What type(s) of
error doesit not detect?
173.
Two
income statements for Midnight Enterprises are shown below:
Midnight EnterprisesIncome Statement
For
Year 1 and Year 2, Ended December 31
|
|
Year 2
|
Year 1
|
|
Fees earned
|
$674,350
|
$520,600
|
|
Operating expenses
|
472,045
|
338,390
|
|
Operating income
|
$202,305
|
$182,210
|
(a) Prepare a vertical analysis of Midnight Enterprises’
income statements.
(b) Does the vertical analysis indicate a favorable or
unfavorable trend?
174.
Explain
the differences between
a) Accrued revenues and unearned
revenues.
b)
Accrued
expenses and prepaid expenses.
c)
Give
an example of each.
175.
For
each of the following, journalize the necessary adjusting entry:
(a)
A
business pays weekly salaries of $22,000 on Friday for a five-day week ending
onthat day. Journalize the necessary adjusting entry at the end of the fiscal
period,assuming that the fiscal period ends (1) on Tuesday, (2) on Wednesday.
(b)
The
balance in the prepaid insurance account before adjustment at the end of the
yearis $18,000. Journalize the adjusting entry required under each of the
followingalternatives: (1) the amount of insurance expired during the year is
$5,300, (2) theamount of unexpired insurance applicable to a future period is
$2,700.
(c)
On
July 1 of the current year, a business pays $54,000 to the city for license
taxes forthe coming fiscal year. The same business is also required to pay an
annual propertytax at the end of the year. The estimated amount of the current
year's property taxallocable to July is $4,800. (1) Journalize the two
adjusting entries required to bring theaccounts affected by the taxes up to
date as of July 31. (2) What is the amount of taxexpense for July?
(d)
The
estimated depreciation on equipment for the year is $32,000.
176. On November 1st, clients of
Great Designs Company prepaid $4,250 for services to be provided in the future
at arate of $85 per hour.
(a) Journalize the receipt of this
cash.
(b) As of November 30th, Great
Designs shows that 15 hours of services have been provided on this
agreement.Prepare the necessary journal entry to record this.
(c) Determine the total unearned fees
in hours and dollars at November 30th.
177.
Prepare
the required entries for the following transactions:
(a)
Austin
Company pays daily wages of $645 (Monday - Friday). Paydays are every
otherFriday. Prepare the Monday, January 31 adjusting entry assuming that the
last paydaywas Friday, January 21.
(b)
Prepare
the journal entry to record the Austin Company’s payroll on Friday, February 4.
(c)
Annual
depreciation expense on the company’s fixed assets is $39,600. Prepare the
adjusting entry to recognize depreciation for the month of
January.
(d)
The
company’s Office Supplies account shows a debit balance of $3,755. A count
ofoffice supplies on hand on January 31 shows $635 worth of supplies on hand.
Preparethe January 31 adjusting entry for Office Supplies.
178. On December 15th, Great Designs
Company hired an independent contractor for a project. The contractorcompleted
the project on December 29th and submitted an invoice for $2,425 which was due
on January 15th. Theamount was duly paid on January 15th.
(a)
Prepare
the journal entries necessary to record these transactions.
(b)
Explain
why you prepared this/these journal entries.
179. On November 15th, Great Designs
Company purchased an advertising campaign for the month of December.Great
Designs paid cash of $2,700 in advance.
The advertising campaign ran in December.
(a) Prepare all necessary journal
entries for the advertising campaign for November and December .
(b)
|
Explain
why you prepared this/these journal entries.
180. On January 2, Safe Motorcycling Monthly received a
check for $72from a subscriber for a 12-monthsubscription. The January issue
was mailed on January 15th. Prepare the necessary entries for the month
ofJanuary.
181. Prepare the December 31
adjusting entries for the following transactions. Omit explanations.
1.
Fees
accrued but unbilled total $6,300.
2.
The
supplies account balance on December 31 is $4,750. Supplies on hand are $960.
3.
Wages
accrued but not paid are $2,700.
4.
Depreciation
of office equipment is $1,650.
5.
Rent
expired during year, $10,800.
|
Date
|
Description
|
Post Ref
|
Debit
|
Credit
|
|
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182.
Prepare
adjusting entries for the following transactions:
(a)
The
beginning balance of the Supplies account was $245. During the month thecompany bought additional
supplies in the amount of $735. At the
end of the month aphysical inventory showed $343 of unused supplies.
(b)
The
company has a 12% Note Payable in the amount of $17,000 due in 6 months.
Theinterest expense for the month has not been recorded.
(c)
The
company has two employees. The manager
is paid on the 15th of every month
forwork performed during the first half of the month and on the 1st of the
following monthfor the work performed during the second half of the month. His
monthly salary is$5,500. The other
employee is paid $650 for each 5 day work week (Monday -Friday). The last day of the month fell on Thursday.
(d)
The
unearned revenue account shows a balance of $46,000. According to the manager60% of that amount
has been earned.
(e)
At
the end of the month $5,700 of services had been performed but not yet billed.
183. On December 31, a business
estimates depreciation on equipment used during the first year of operations to
be$2,900. (a) Journalize the adjusting entry required on December 31. (b) If
the adjusting entry in (a) were omitted,which items would be erroneously stated
on (1) the income statement for the year and (2) the balance sheet as ofDecember
31?
184. At the end of the fiscal year,
the following adjusting entries were omitted:
(a)
No
adjusting entry was made to transfer the $1,750 of prepaid insurance from
theasset account to the expense account.
(b)
No
adjusting entry was made to record accrued fees of $525 for services providedto
customers.
Assuming that financial statements are prepared before the
errors are discovered, indicate the effect of each error,considered
individually, by inserting the dollar amount in the appropriate spaces. Insert "0" if the error does
notaffect the item.
|
|
|
Error (a)
|
Error (b)
|
||
|
|
|
Over-
stated
|
Under-
stated
|
Over-
stated
|
Under-
stated
|
|
(1)
|
Assets at December 31 would be
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
(2)
|
Liabilities at Dec. 31 would be
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
(3)
|
Net income for the year would be
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
(4)
|
Owner’s equity at Dec. 31 would be
|
$
|
$
|
$
|
$
|
185. Journalize the six entries to
adjust the accounts at December 31.
(Hint: One of the accounts was affected by twodifferent adjusting
entries).
|
|
Unadjusted
Trial Balance
|
Adjusted
Trial Balance
|
||
|
|
Debit
Balances
|
Credit Balances
|
Debit
Balances
|
Credit Balances
|
|
Cash
|
5,000
|
|
5,000
|
|
|
Accounts Receivable
|
32,000
|
|
32,600
|
|
|
Supplies
|
3,600
|
|
100
|
|
|
Prepaid Insurance
|
4,000
|
|
1,400
|
|
|
Equipment
|
11,000
|
|
11,000
|
|
|
Accumulated Depreciation
|
|
|
|
1,700
|
|
Wages Payable
|
|
|
|
2,000
|
|
Unearned Fees
|
|
8,900
|
|
3,500
|
|
Ann Cole, Capital
|
|
22,000
|
|
22,000
|
|
Fees Earned
|
|
69,000
|
|
75,000
|
|
Wages Expense
|
44,300
|
|
46,300
|
|
|
Supplies Expense
|
|
|
3,500
|
|
|
Insurance Expense
|
|
|
2,600
|
|
|
Depreciation Expense
|
|
|
1,700
|
|
|
Total
|
99,900
|
99,900
|
104,200
|
104,200
|
186. Jordon James started JJJ
Consulting on January 1. The following
are the account balances at the end of the firstmonth of business, before
adjusting entries were recorded:
|
Accounts
Payable
|
$300
|
|
Accounts
Receivable
|
750
|
|
Cash
|
6,300
|
|
Consulting
Revenue
|
4,925
|
|
Equipment
|
7,000
|
|
Jordon
James, Capital
|
15,000
|
|
Jordon
James, Drawing
|
1,375
|
|
Prepaid
Rent
|
4,000
|
|
Supplies
|
800
|
Adjustment data:
Supplies on hand at the end of the month: $200Unbilled
consulting revenue: $700
Rent expense for the month: $1,000Depreciation on equipment:
$90
(a) Prepare the required adjusting
entries, adding accounts as needed.
(b)
Prepare
an adjusted trial balance for JJJ Consulting as of January 31.
187. Complete the missing items in
the Summary of Adjustments chart:
|
Prepaid Expenses
|
||
|
Examples
|
Adjusting Entry
|
Financial
Statement Impactif Adjusting Entry is Omitted
|
|
Supplies,
(a)
|
Dr. ExpenseCr. Asset
|
Income Statement:Revenues: No
effectExpenses: UnderstatedNet income:
(b)
Balance
Sheet:Assets: (c)Liabilities: (d)
Owner’s
equity: Overstated
|
|
Unearned Revenues
|
||
|
Examples
|
Adjusting Entry
|
Financial
Statement Impact ifAdjusting Entry is Omitted
|
|
Unearned Rent,
(e)
|
(f)
|
Income Statement:Revenues: (g)Expenses: No effectNet
income: (h)
Balance
Sheet:Assets: (i)
Liabilities:
Overstated
Owner’s equity: (j)
|
|
Accrued Revenues
|
||
|
Examples
|
Adjusting Entry
|
Financial
Statement Impact ifAdjusting Entry is Omitted
|
|
Interest incomedue on a note,(k)
|
Dr.
Asset
Cr.
Revenue
|
Income Statement:Revenues: (l)Expenses: (m)
Net income: UnderstatedBalance Sheet:
Assets: (n)
Liabilities: (o)
Owner’s equity: Understated
|
|
Accrued Expenses
|
||
|
Examples
|
Adjusting Entry
|
Financial
Statement Impact ifAdjusting Entry is Omitted
|
|
Interest due on anote payable,
(p)
|
(q)
|
Income Statement:Revenues: No
effectExpenses: (r)
Net
income: (s)
Balance
Sheet:Assets: (t)
Liabilities:
Understated
Owner’sequity:(u)
|
188. Two income statements for
Danielle’s Design Services are shown below:
Danielle’s Design Services
Income Statements
For
Years 1 and 2 Ending December 31
|
|
Year
2
|
Year
1
|
|
Fees earned
|
$765,340
|
$696,520
|
|
Operating expenses:
|
|
|
|
Wages expense
|
$254,000
|
$214,600
|
|
Rent expense
|
120,000
|
108,000
|
|
Supplies expense
|
76,500
|
98,715
|
|
Miscellaneous expense
|
11,680
|
16,420
|
|
Total operating expenses
|
$462,180
|
$437,735
|
|
Net income
|
$303,160
|
$258,785
|
(a) Prepare a
vertical analysis of Danielle’s Design Services income statements.
(b)
What
types of trends are indicated: favorable or unfavorable?
(c)
What
other information would enhance the analysis?
189. Bloom's Company pays bi-weekly
salaries of $40,000 every other Friday for a ten-day period ending on
thatday. The last payday of December is
Friday, December 27. Assuming the next
pay period begins on Monday,December 30, journalize the adjusting entry
necessary at the end of the fiscal period (December 31).
|
Date
|
Description
|
PostRef
|
Debit
|
Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190. A business pays bi-weekly
salaries of $20,000 every other Friday for a ten-day period ending on that day. The lastpayday of December is Friday,
December 27. Assuming the next pay
period begins on Monday, December 30 andthe proper adjusting entry is
journalized at the end of the fiscal period (December 31). Journalize the entry for thepayment of the
payroll on Friday, January 10.
|
Date
|
Description
|
PostRef
|
Debit
|
Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191.
Services
provided that have not been recorded.
192. Paid for one year’s insurance
policy.
193. Retainer fee received from a
client for future legal representation.
194. Annual property taxes that are
paid at the end of the year.
195. Electric bill to be paid next
month.
196. Paid for a 6-month magazine
subscription.
197. Received payment covering a
6-month magazine subscription.
198. Provided tutoring for a student
that will be invoiced next month.
199. Received 6 months of rental
payments from a tenant.
200. Paid 6 months of rental payments
to the landlord.
201. Annual depreciation on
equipment, recorded on a monthly basis.
202. A contract to provide tutoring
services beginning next month was signed.
203. No adjustment was made for
supplies used up during the month.
204. Wages are paid every Friday for
the 5-day work week. The month ended on
Monday and no adjustment wasrecorded.
205. Interest earned on a note
receivable was not recorded.
206. Services provided to customers
on the last day of the month were not billed.
207. An attorney has earned 1/2 of a
retainer fee that was received and recorded last month. No adjustment wasrecorded for the amount
earned.
208. Property taxes are paid
annually. The estimated monthly amount
for the taxes was not recorded.
209. Depreciation on equipment was
not recorded.
210. A tenant paid 6 months' rent in
advance when he moved in on the first day of the month. No entry was made onthe last day of the
month.
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